Credit scoring is creating havoc for mortgage applications to high street lenders. Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find all high street lenders doors shut to you. Even your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score, the computer says “no” and they will not offer you a mortgage.
But you have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) has taken over and there’s no arguing with the lender once their technology has made the decisions.
All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc . Every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score maybe.
Fear not! There is light at the end of the tunnel. AToM recognised that good clients were being rejected by lenders for no apparent reason and has built up exclusive relationships with a number of lenders who will assess an application manually and seek to offer assistance to such customers. This is our alternative to ‘the computer says no’ and have found an avenue for the right deals working with lenders that not only manually underwrite cases, but who have an appetite to lend. We call this Complex Prime and it does not just include those turned away by their bank for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors or maybe just need someone to sit down, review the whole picture and advise on the best route to take.
I have always suggested that you speak to an independent mortgage broker with access to whole of market mortgages. Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.
26 August 2011
19 August 2011
Really exciting mortgage products!
Some really exciting new mortgage products have been launched over the last week. You could even go as far to say the lenders are pretty confident that rates are not going to be fluctuating any time soon. One article I saw had a spokesperson from moneysupermarket.com suggesting the likelihood of Bank Base Rate being cut by 0.25% is greater now than it has ever been! Great for the consumer! Not so great for getting money moving around the mortgage markets!
SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last few weeks. The cost of 5 year fixed monies currently resides around the 1.80% mark. The Lender then provides the product to you, the customer, at rates currently in excess of 3%. In comparison, 2 year fixed rates monies stand around 1.20%.
As a result, we’ve seen a number of long term fixed rates launched over the last few weeks and the one causing great excitement (as I write) is from Coventry for Intermediaries who are offering a 2.99% fixed rate available for 2,3 or 4 years. The lenders fees range from £200 to £1800 and can be added to the loan. The lender also offers one free property valuation and free legal costs on remortgages, so keeping the cost of changing to them at a minimum. Five year fixed rates have also reduced with some lenders offering rates as low as 3.39%.
House price commentary continues to make headlines as rightmove.co.uk report a decrease of 0.1%, despite property transactions increasing by 5% in July. This is in line with Zoopla.co.uk who suggests that two in five, 39% of all properties currently for sale, have had their asking prices reduced at least once since coming on to the market. And Investec Specialist Private Bank reported a 10% increase in high valued properties during the second quarter of 2011, with over 21 thousand properties up for sale valued at £1m and over.
SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last few weeks. The cost of 5 year fixed monies currently resides around the 1.80% mark. The Lender then provides the product to you, the customer, at rates currently in excess of 3%. In comparison, 2 year fixed rates monies stand around 1.20%.
As a result, we’ve seen a number of long term fixed rates launched over the last few weeks and the one causing great excitement (as I write) is from Coventry for Intermediaries who are offering a 2.99% fixed rate available for 2,3 or 4 years. The lenders fees range from £200 to £1800 and can be added to the loan. The lender also offers one free property valuation and free legal costs on remortgages, so keeping the cost of changing to them at a minimum. Five year fixed rates have also reduced with some lenders offering rates as low as 3.39%.
House price commentary continues to make headlines as rightmove.co.uk report a decrease of 0.1%, despite property transactions increasing by 5% in July. This is in line with Zoopla.co.uk who suggests that two in five, 39% of all properties currently for sale, have had their asking prices reduced at least once since coming on to the market. And Investec Specialist Private Bank reported a 10% increase in high valued properties during the second quarter of 2011, with over 21 thousand properties up for sale valued at £1m and over.
05 August 2011
Statistics tell the story
Of late, the mortgage market has been a very positive place with product choice rapidly on the increase. Lenders have been appearing keen to lend and some even wanting to help over and above the normal call of duty! But (and you knew it was coming!), the statistics are still showing the fragile state of our economy.
August’s creditaction figures state that:
- 331 people every day of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 60 seconds during a working day.
- 1,577 Consumer County Court Judgements (CCJs) were issued every day during Q1 2011 and the average judgement amount was £3,118.
- 220 mortgage possession claims will be issued and 160 mortgage possession orders will be made today (100 properties were repossessed every day during Q1 2011)
- 1,578 people reportedly were made redundant every day during the 3 months to end May 2011
- The UK population is projected to grow by 1,205 people a day over the next decade
However, despite all of these eye opening and, frankly, quite depressing figures, the one that really is quite unbelievable in the current climate is that, in Q1 2011, UK banks and building societies wrote off £1.89bn (£866m of that being credit card debt). This amounts to a write-off of £20.71m a day! Who said lenders have funding issues??
The average house price in the UK in May 2011 for first time buyers stood at £150,685 which is an annual decrease of 2.1%. The typical first-time buyer deposit in May was 20% (£29,874). The average first-time buyer borrowed 3.14 times their income and the average first-time buyer loan was £119,497.
As at the end of March, there were 1.3m buy-to-let mortgages outstanding, worth a total of £152 bn. By value, buy-to-let mortgages accounted for 12.3% of all mortgages.
And finally, as the summer is well underway - Barclays estimate that, over the course of the six week summer holiday period, British holidaymakers will spend a total of £1.47 billion whilst they are abroad (via debit cards and cash withdrawals). However, Barclays say that this figure is broadly the same as that for summer 2010, and suggest that this shows that consumer confidence has not totally bounced back since the end of the recession.
Next week will be more positive, honest! Sometimes, we just need a reality check!
August’s creditaction figures state that:
- 331 people every day of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 60 seconds during a working day.
- 1,577 Consumer County Court Judgements (CCJs) were issued every day during Q1 2011 and the average judgement amount was £3,118.
- 220 mortgage possession claims will be issued and 160 mortgage possession orders will be made today (100 properties were repossessed every day during Q1 2011)
- 1,578 people reportedly were made redundant every day during the 3 months to end May 2011
- The UK population is projected to grow by 1,205 people a day over the next decade
However, despite all of these eye opening and, frankly, quite depressing figures, the one that really is quite unbelievable in the current climate is that, in Q1 2011, UK banks and building societies wrote off £1.89bn (£866m of that being credit card debt). This amounts to a write-off of £20.71m a day! Who said lenders have funding issues??
The average house price in the UK in May 2011 for first time buyers stood at £150,685 which is an annual decrease of 2.1%. The typical first-time buyer deposit in May was 20% (£29,874). The average first-time buyer borrowed 3.14 times their income and the average first-time buyer loan was £119,497.
As at the end of March, there were 1.3m buy-to-let mortgages outstanding, worth a total of £152 bn. By value, buy-to-let mortgages accounted for 12.3% of all mortgages.
And finally, as the summer is well underway - Barclays estimate that, over the course of the six week summer holiday period, British holidaymakers will spend a total of £1.47 billion whilst they are abroad (via debit cards and cash withdrawals). However, Barclays say that this figure is broadly the same as that for summer 2010, and suggest that this shows that consumer confidence has not totally bounced back since the end of the recession.
Next week will be more positive, honest! Sometimes, we just need a reality check!
29 July 2011
'Near Prime' mortgage options on the increase
My articles over the recent weeks have concentrated on the apparent ‘rate war’ raging between lenders in the Buy to Let, First Time Buyer and Residential sectors. We should not ignore that the same is also happening in the ‘Near Prime’ arena. I’m calling it ‘Near Prime’, but it has many other names including, Sub Prime, Credit Repair, Almost Prime, Adverse and so on. In short, it’s the area of mortgages that cater for those who have had some sort of financial issue in the past.
There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs), discharged bankrupts/IVAs and those who are in a debt management plan.
There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed. However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’. But where there is demand, there will always be supply.
Rates start from the early 3%s and go right up to the early 9%s, depending on individual circumstances. Lenders will lend up to 80% of the property value in the main and will cater for both employed and self employed. Some rates are also offered without any redemption penalties.
Financial issues do adversely affect credit scores (the normal assessment process used by a lender to decide whether to lend or not), and as such, some Near Prime lenders will manually review on a credit search, rather than resort to a credit score.
Finally, the Near Prime lender is a ‘stepping stone’. Most issues tend to disappear from a credit search after a few years. Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.
There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs), discharged bankrupts/IVAs and those who are in a debt management plan.
There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed. However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’. But where there is demand, there will always be supply.
Rates start from the early 3%s and go right up to the early 9%s, depending on individual circumstances. Lenders will lend up to 80% of the property value in the main and will cater for both employed and self employed. Some rates are also offered without any redemption penalties.
Financial issues do adversely affect credit scores (the normal assessment process used by a lender to decide whether to lend or not), and as such, some Near Prime lenders will manually review on a credit search, rather than resort to a credit score.
Finally, the Near Prime lender is a ‘stepping stone’. Most issues tend to disappear from a credit search after a few years. Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.
22 July 2011
Product Choice still on the increase!
Product choice has been on the increase over the past few months. Independent research company, Defaqto, suggest that 8,968 mortgage products were brought to market, or updated between April and June this year.
186 brand new fixed rate mortgages were introduced and there were 4,815 changes to existing fixed rate deals. 80 Tracker rate mortgages were launched and 99 buy to let products were brought to market.
Defaqto also go on to say that, given the speed of change in the mortgage market, lenders are faced with three key challenges:
• Keeping on top of what competitors are doing, and being aware of new launches or product changes as soon as they happen
• Being able to respond quickly to take advantage of opportunities or to counter threats
• Identifying how to make their mortgage product stand out from the competition and how they can cut through the noise of competing products to reach target consumers
Although obvious, I think this hits the nail on the head. In the current climate, lenders are changing rates daily to keep abreast of each other. Some are launching marketing leading products, available for just a week, in order to bolster business volumes. This is good news for you, the consumer! Do keep any eye on AToM’s shop front window in the Carfax (near the bandstand), as we are now highlighting some of the most competitive rates available. Just be wary that rates can be withdrawn at any time!
Moneysupermarket.com have also highlighted that there are good opportunities around for those with a 10% deposit. 312 products are now on offer and this is up 17% compared to June.
Someone asked me this week if it is true that FSA spent more than £500k on internal caterers for staff and visitors last year. They also asked if it was true that this represented an increase of more than 30% on 2009 and, finally, they asked if it was true that the top job in the FSA now pays more than £800k per annum (against the £308k paid to the Governor of The Bank of England). I immediately responded that I could not possibly comment!
186 brand new fixed rate mortgages were introduced and there were 4,815 changes to existing fixed rate deals. 80 Tracker rate mortgages were launched and 99 buy to let products were brought to market.
Defaqto also go on to say that, given the speed of change in the mortgage market, lenders are faced with three key challenges:
• Keeping on top of what competitors are doing, and being aware of new launches or product changes as soon as they happen
• Being able to respond quickly to take advantage of opportunities or to counter threats
• Identifying how to make their mortgage product stand out from the competition and how they can cut through the noise of competing products to reach target consumers
Although obvious, I think this hits the nail on the head. In the current climate, lenders are changing rates daily to keep abreast of each other. Some are launching marketing leading products, available for just a week, in order to bolster business volumes. This is good news for you, the consumer! Do keep any eye on AToM’s shop front window in the Carfax (near the bandstand), as we are now highlighting some of the most competitive rates available. Just be wary that rates can be withdrawn at any time!
Moneysupermarket.com have also highlighted that there are good opportunities around for those with a 10% deposit. 312 products are now on offer and this is up 17% compared to June.
Someone asked me this week if it is true that FSA spent more than £500k on internal caterers for staff and visitors last year. They also asked if it was true that this represented an increase of more than 30% on 2009 and, finally, they asked if it was true that the top job in the FSA now pays more than £800k per annum (against the £308k paid to the Governor of The Bank of England). I immediately responded that I could not possibly comment!
15 July 2011
Switch and Fix on Buy to Let!
More movement in the mortgage market this week as yet more lenders have decreased rates and a pricing war seems to be unfolding in the longer term fixed rate offerings. One lender, Accord Mortgages, have reduced their 5 year fixed rate to just 3.84%, available to 75% of the property value and with a lender fee of just £995. They have also reduced their 2 year fixed to 2.79%, also with a £995 fee.
Loans of 90% of the property value and over also seem to have been targeted this week as lenders seek to assist those with small deposits. The rates are reasonably priced, but as more and more lenders re-enter this arena, with sensible lending, the rates will decrease. One example is Kensington Mortgages, funded by Investec, who offer First Time Buyers a 2 year fixed rate at 5.99% with a £699 fee and a free valuation, with a 10% deposit required. For home movers, the rate is 5.79% with a £999 fee. The benefit with Kensington is they do not credit score, compared to many others. Certainly an area to keep an eye on over the coming weeks.
The Buy to Let (BTL) market has also seen huge changes as Natwest cut some rates by 1.4%, Mortgage Trust (part of Paragon group) launch 18 new BTL products, some starting from sub 4% and The Mortgage Works (part of Nationwide) launch a 2.99% tracker and allow ‘switch to fix’ on all of their Buy to Let trackers.
The Switch to Fix option is now available on both Residential and Buy to Let mortgages via certain providers. It is a great product offering allowing you to have the best of both worlds. Take a low base rate tracker and enjoy the Bank of England base rate whilst low, and when you feel you want to fix your monthly payments for a medium to longer term, transfer to a fixed rate with the same lender. Sounds great, but just beware that the lender may charge a product fee for the fixed rate and of course, you will only have access to those fixed rates available at the time of the switch. Terms and conditions apply!
Loans of 90% of the property value and over also seem to have been targeted this week as lenders seek to assist those with small deposits. The rates are reasonably priced, but as more and more lenders re-enter this arena, with sensible lending, the rates will decrease. One example is Kensington Mortgages, funded by Investec, who offer First Time Buyers a 2 year fixed rate at 5.99% with a £699 fee and a free valuation, with a 10% deposit required. For home movers, the rate is 5.79% with a £999 fee. The benefit with Kensington is they do not credit score, compared to many others. Certainly an area to keep an eye on over the coming weeks.
The Buy to Let (BTL) market has also seen huge changes as Natwest cut some rates by 1.4%, Mortgage Trust (part of Paragon group) launch 18 new BTL products, some starting from sub 4% and The Mortgage Works (part of Nationwide) launch a 2.99% tracker and allow ‘switch to fix’ on all of their Buy to Let trackers.
The Switch to Fix option is now available on both Residential and Buy to Let mortgages via certain providers. It is a great product offering allowing you to have the best of both worlds. Take a low base rate tracker and enjoy the Bank of England base rate whilst low, and when you feel you want to fix your monthly payments for a medium to longer term, transfer to a fixed rate with the same lender. Sounds great, but just beware that the lender may charge a product fee for the fixed rate and of course, you will only have access to those fixed rates available at the time of the switch. Terms and conditions apply!
08 July 2011
A 5 year fixed at 3.89%! Very nice!
Shortly after writing and submitting last weeks article, nearly every lender reduced their rates! It must have been something in the water, but this really does now signify a superb time to review the amazing mortgage products on offer and see if you could make savings on your current arrangements. The most noticeable headline product was from Nationwide, who launched a 5 year fixed rate at 3.89% with a product fee of £900 and a £99 booking fee. Available for loans up to 70% of the property value, this product provides exceptional value for those looking to fix their monthly payments for a reasonable amount of time. Nationwide becomes hero of the week! Perhaps, in future articles I should nominate hero and villain of the week. Perhaps not, as that would set me up to be shot at as well I guess!
Late last week, Hinckley and Rugby Building Society launched an exclusive Buy to Let product, only available through AToM. The rate is fixed at 3.99% for 2 years up to a maximum loan to value of 65%. The lender fee of £1,250 (cheap compared to many) is added to the loan within the 65%) and this is a very attractive rate for those landlords looking to fix rates for the next couple of years and maximise their income.
Godiva, the intermediary of Coventry Building Society have launched a superb 2.99% flexible rate for the life of the mortgage to 75% on either purchase or re-mortgage cases. Their booking fee is just £199 and the arrangement fee is £800 and this can be added to the advance. What makes this product even more exciting is that there are no early redemption interest charges at any time. If you are re-mortgaging the lender will cover the cost of a standard valuation (up to fee value £670) and standard legal fees too. The product is also fully flexible and should therefore appeal to many borrowers looking for both a cheap rate and flexible mortgage options.
The only thing to note with these products is that they tend to have a short shelf life, so don't delay! Talk with your independent financial advisor.
Late last week, Hinckley and Rugby Building Society launched an exclusive Buy to Let product, only available through AToM. The rate is fixed at 3.99% for 2 years up to a maximum loan to value of 65%. The lender fee of £1,250 (cheap compared to many) is added to the loan within the 65%) and this is a very attractive rate for those landlords looking to fix rates for the next couple of years and maximise their income.
Godiva, the intermediary of Coventry Building Society have launched a superb 2.99% flexible rate for the life of the mortgage to 75% on either purchase or re-mortgage cases. Their booking fee is just £199 and the arrangement fee is £800 and this can be added to the advance. What makes this product even more exciting is that there are no early redemption interest charges at any time. If you are re-mortgaging the lender will cover the cost of a standard valuation (up to fee value £670) and standard legal fees too. The product is also fully flexible and should therefore appeal to many borrowers looking for both a cheap rate and flexible mortgage options.
The only thing to note with these products is that they tend to have a short shelf life, so don't delay! Talk with your independent financial advisor.
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